Biometrics industry stocks this week: Aware, IDEX, Precise, NEXT

Biometrics industry stocks this week: Aware, IDEX, Precise, NEXT

Publicly-traded biometrics companies continue to report fourth quarter results. One of those was the Bedford, Massachusetts-based, Aware Inc. The company’s shares trade on Nasdaq. The stock is trading off in the wake of the latest numbers.

The company registered a net loss in the quarter of $600,000. That doesn’t compare well to the same quarter last year when the company registered income of $500,000. Management explained the decrease in revenue was due primarily to lower license sales on software for imaging. Services sales and patent-related income was also lower. Lower biometrics license sales to the United States Marine Corps and the United States Navy were other factors cited.

As is the case with so many other companies this quarter earnings were affected by Trump’s tax bill. According to management net income in 2017 was $400,000 lower due to higher income tax expense.

In a press release Kevin Russell, CEO and president, was sure to highlight the positive events of the year. “In 2017, we introduced Indigo Onboard, a cloud-based biometric identity solution for better onboarding and Knomi, a mobile biometric authentication framework offering face, voice and keystroke dynamics. We also added solutions for new biometric modalities in voice and behavioral biometrics to our existing fingerprint, face and iris offerings… While our revenue results for the year were lower than we hoped for, we continue to be encouraged by… the worldwide… opportunities for our biometric solutions…,” said Russell.

Precise Biometrics also reported numbers this past week. The Scandinavian outfit reported net sales of SEK 14.2 million (USD $1.77 million) in the fourth quarter of last year. For the full year sales were SEK 61 million (USD $7.6 million). These numbers represent declines from last year’s sales numbers. Like many companies in this sector there is a shift in business lines to pursue new emerging markets. Results reflect this shift.

This past fall Precise indicated it would pivot away from the mobile smart card business. The stock had already taken a hit in the fall when the company issued revised guidance numbers. The net sales numbers represent a decline of 32 percent for the quarter from fourth quarter of 2016 and 27 percent for the year. Precise registered for the full year an operating loss of SEK 13.9 million (USD $1.7 million) after posting an operating profit of SEK 25.4 million (USD $3.2 million) in 2016. Net sales for Q4 2017 were actually up significantly from SEK 10.1 million (USD $1.3 million) in the third quarter.

It was a quarter that also saw Håkan Persson resign as CEO. Stefan K. Persson will take over. Persson has already found a new job with Neonode Inc., a Stockholm-based developer of optical sensing technologies for tech devices.

A similar story played out at IDEX recently. The company swapped out the last CEO, Hemant Mardia, for Stan Swearingen, Chief Products Officer. The change is effective April 1st. Companies are reorienting corporate assets to manage new market realities. Some shifts have taken place.

At the time Precise announced the change in CEO the chairman of the board, Torgny Hellström, who was quoted as saying that an important trend is a shift in the market for capacitive sensors. That market has matured. It is gradually being transformed into a volume market, primarily for mobile phones in the lower price segments. This new market has put pressure on prices. But there are also opportunities. According to Hellström, the new environment, “… has opened up the opportunity to use capacitive sensors in cheaper mobile phones in several geographical markets. The company has several customers working in this segment… We are also seeing the design of mobile phones in the higher price segments moving towards displays that cover the entire front side, while at the same time induction charging, ‘wireless charging’, which requires a glass back, is growing. In both cases, optical or ultrasound sensors are the best alternative for a fingerprint solution. We have more than ten customers working with such sensors.”

Hellström went on: “Our vision of convenient and secure authentication of identity for everyone, everywhere, is more relevant now than ever. Biometrics will increasingly replace passwords and other forms of authentication for cars, door locks and wearables, areas in which we are involved in several projects and intend to drive and continue to be part of developments in the future,” he said.

Management at several companies have been careful to reassure investors they are following up on the new market potential in smart cards. A good example: Another recent bit of earnings news comes from NEXT Biometrics, which hosted a ‘Capital Markets Day’ Thursday, March 1st.

The day-long event included presentations from management, as well as one Marc Muller, director of technology at a company named Tactilis. NEXT showed off its flexible fingerprint sensor technology at the ASPCA conference in Singapore last fall. Since then NEXT’s large area flexible sensor has been integrated into Singapore-based Tactilis’ biometric-system-on-card.

NEXT management talked about the recent launch of the Oyster II fingerprint reader this fall. The executives highlighted that four million sensors have been shipped. A coating machine installed in 2017 is improving quality in the production of both flexible and rigid sensors.

But cash flow is negative. And that’s a problem. The company reported a loss of NOK 34.1 million in the fourth quarter of 2017. Cash levels within the company continue to drop. Ritu Favre, the relatively new CEO of NEXT, was quoted as saying, “In Q4 we continued to develop a range of products featuring our proprietary, large and cost-efficient rigid and flexible fingerprint sensors with a focus on driving profitable growth within our targeted markets of smart cards, government ID, access and notebooks. We have developed the first ISO compliant smart card with a flexible sensor together with one of our ecosystem partners, we have a roadmap in place to enhance our leading sensor technology and we have proven our mass production capabilities, all of which position us at the forefront of the security, user experience and cost critical emerging, high volume segments of the biometrics market.”

Like others in the sector management indicated it has “pivoted” the focus of the company’s development to smart cards and government ID. Fujitsu began using the company’s fingerprint sensors in notebooks and tablets this quarter. Tests organized by the India STQC Test Institute for certification on the Aadhaar project are moving along. And so things are moving forward. Cash flow will turn around, though, the company could go back to the market and offer shares. Whatever the case, according to the board NEXT will continue to place its highest level of focus on smart card plans. “The investments and expense levels are expected to peak in the next quarters of 2018. The board has in light of the expected increase in investments, initiated activities to ensure relevant company financing,” according to the presentation.

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